Monday, April 08, 2013

Twenty years ago, the argument for higher education, particularly a 4 year bachelor's degree, was pretty sound. Private Universities averaged about $15k/year and state schools were about 1/2 of that number.

In the last 20 years a combination of factors - increased ease of student borrowing, low interest rates, explosive demand for higher education and aggressive college expansions - have pushed a college degree up from $40-$50k to nearly $250k at the most expensive schools.

At this point it seems fair to ask -- is it worth the cost?

This is a difficult concept for many of us to comprehend. We grew up in an America where you did well in school to get into a good college to get a good job to have a 40 year career with a Fortune 500 company. Well, the last part of that equation is now gone for good. Today's children will have to constant reinvent themselves learning new skills throughout their career to stay relevant and employed.

However, this doesn't necessarily mean college is outdated in this world. In a world where 60% of graduates are unable to find work in their degree field and of those that can find work the average starting salary is just under $45k, a $250,000 bill seems out of line.

So, I've mentioned before the groundswell occurring in the higher education world that is moving at breakneck speed. There are some really amazing companies that are working to bring higher education to everyone for free or some nominal cost. Some states have begun taking the bold step of offering credit for massive open online classes.

Here's my vision: If I were the governor of a small state that lacked a major state university (Rhode Island, Maine, the Dakotas, and Delaware come to mind) and if I was fighting population trends I'd have a plan. First, I'd partner with a major MOOC like edX or Udacity and immediately offer credit for classes taken online if a student passes a proctored exam. I'd set class prices at $495 per 3 credit hours for the first 3 years (which could be done as fast as the student can work - maybe he's aggressive and wants to finish in 18 mths -- go for it). Now you'd probably have 30,000 students or so and they'd each have spent about $15,000 to get to this point. For their Senior year I'd have these students come to our new campus where they'd finish their college career with a mix of traditional classes and internships at 3 different companies. Hopefully, many of these kids would chose to live and work in my state after their senior year. Maybe they'd start a business or maybe they'd just tell everyone what a great time they had in our state. We'd be at the forefront of educating the next generation 21st century workers with 21st century skills using 21st century tools.

As this model grew in popularity the major institutions would see applications start to decline. Pretty soon the best and brightest wouldn't be fighting to get into second rate schools. This lower demand would lead to more competitive college pricing. Soon a 4 yr degree might again cost $50k-$100k. Everybody wins.

Having said all of this, if one of my kids gets into MIT or Princeton you know I'm writing a big fat check so I'm all talk :)

Sunday, April 07, 2013

So after a week of suffering through 85 degree weather in the Caribbean I returned to the good ol' US to hear that the jobs number was a whiff. I'll get to that in a second.

1) I don't spend a lot of time analyzing the mainstream media's obsession with the markets but when you spend a week without access to the web and USA Today is your only source of news you get a fresh perspective on what's being spoon fed to consumers.

During this past week I saw articles on -

* How the housing market has bounced back so much that people that went bust in 2007 buying overpriced shacks in Las Vegas are now able to once again get 5% loans for overpriced shacks in Las Vegas.

* How the Dow is at another high.....wait, wait, wait.... Yes, that's another high... and wait, yep there's one more.

* How everyone is piling back into the market just like in 2007 and Jan of 2000 which obviously worked out beautifully.

The point is that these mainstream articles are written to fit a theme. I guarantee there were about 20 different Reuters articles teed up Friday morning with interviews of small businesses around the country talking about how they are still hiring and seeing strong sales. Then, the jobs number came out and it was a mad scramble to come up with a different story line.

2) The jobs report - First, everyone is on to the participation rate decline at this point. It's old news and it's time for people to let it go. Yes, participation is declining but it's less from people just dropping out and more from the aging of our population. This trend is likely to continue for a long time - get used to it.

I will however say that we need to see the participation rate among 25-54 yr olds improve. This number has slipped to about 81% from 83% or so pre-recession. Until this number turns, we're pretty much swimming upstream.

In general, this was a much weaker than expected report but in our market where anything over 5 minutes old might just as well be 20 year old news the market mostly shrugged off the report by the end of the day.

2) Which brings me to today's stats of the day - 70% of trades in the US are now High Frequency trading and the average length of time a stock is held.... 22 SECONDS!!! So for all of you long-term investors out there, you should know that while your Pfizer is sitting in your account the computers traded it 1,200 times each day. Good luck out there! Someone made a good point on the Sunday talk shows today - all of the Federal Reserves moves have done a great job supporting financial assets but the core of the US economy remains very stagnant.

3) The good from this week:
U.S. construction spending better than expected. ECB might be more aggressive.
Mtg purchase applications were up
Gasoline falls to 7 week lows at $3.63.

The bad from this week:
Jobs numbers were ugly - biggest miss in 2 yrs.Workforce participation rate continues to fall Jobless claims hit the highest weekly number since Thanksgiving. EU unemployment rate rises to record 12% Oh, and N. Korea seems to be prepping another nuke test. Yippee!

I'll try to stay on top of some breaking world news this week as well - watch this bird flu story (which is TOTALLY unrelated to the 10,000 floating pig carcasses from 2 weeks ago) and any news out of N. Korea. Yes, N. Korea is just looking for attention but their rapid movements are making it hard to analyze if the game has really changed.

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About Me

I grew up in La Fargeville before attending college in Manhattan and ultimately working on Wall Street for about 10 yrs. I left NYC/NJ in 2003 and relocated my family to the beautiful waterfront of Clayton, NY. I spend my days caring for my 2 daughters and dabbling in the markets.